LUCK held its corporate briefing today to discuss its operational and financial performance for 1QFY25. The company posted a consolidated NPAT of PKR19.8bn (EPS: PKR61.18), flat YoY, despite weaker domestic volumes. Higher retention prices at the North plant helped maintain profitability.
Key takeaways from the briefing:
Update on local cement operations:
§ LUCK’s domestic sales were 1.8mn MT, down 22% YoY, compared to the decline of 20% YoY in industry sales. The underperformance led to a 0.6ppt YoY decline in market share to 16.9%. Last year, market share was elevated due to a new plant coming online; however, it has normalized this quarter due to increased competition.
§ Export volumes, however, surged 2x YoY in 1QFY25, outperforming the industry’s growth of 17% YoY. The normal tax regime on exports has resulted in a bottom-line loss for export operations; however, it allows for tax reversals on profitable domestic operations.
§ Local retention prices are PKR15,500-16,000/ton, while export prices are US$30/ton for clinker and US$40/ton for cement.
§ LUCK’s average coal cost in 1Q was PKR38,000/ton. The South plant relies on imported coal, while the North plant uses a mix of Afghan and local coal, though imported coal is still preferred. Afghan coal prices are expected to decrease by PKR5,000-6,000 per ton due to recent tax changes by the Afghan government; however, this adjustment is expected to occur with a lag.
§ The 28.8MW wind power project has been completed, raising the share of renewable energy in LUCK’s power mix to 55%, with the remainder sourced from the grid or furnace oil.
§ Management anticipates improved local sales volumes in the coming months due to the recent sharp fall in inflation and interest rates.
Other Items:
§ Presently, accounts receivables for LEPCL stand at 4-5 months of invoicing.
§ The company is diversifying via National Resource Ltd (NRL), entering the copper and gold mining sector. The project is in the pre-feasibility stage, and significant capital expenditure will be needed if the mineral potential is high.
§ Of the PKR3.9bn in other income, PKR0.3bn comes from YEL, PKR1.7bn from LCI, and the remainder from cash balances.
§ Management is optimistic about the outlook for its businesses, anticipating improvements across cement, auto, and mobile phone sectors as lower interest rates and inflation should drive demand growth. Consequently, all companies are expected to perform better compared to 1QFY25.
